Georgia Enacts Legislation Allowing State to Enter Tax Sharing Agreement

On May 12, the Georgia Governor signed legislation implementing certain provisions of the Nonadmitted and Reinsurance Reform Act (NRRA).  Notably, Georgia’s NRRA legislation authorizes the Governor, in consultation with the Commissioner, to enter into an agreement with other states to collect and share premium taxes on multi-state risks, subject to certain conditions and limitations.  In connection with Georgia’s NRRA efforts, NAPSLO provided draft legislation and comments to the legislature.  Georgia is the 19th state to pass NRRA implementing legislation during this session.

The NRRA mandates that beginning July 21, an insured's home state is the only state with jurisdiction over surplus lines transactions, and therefore, the only state that can require a tax be paid by the broker.  In the wake of the NRRA, many states are working to bring their laws into compliance.

As amended, Georgia’s legislation authorizes the Governor, in consultation with the Commissioner, to enter into a tax-sharing agreement substantially in the form of Slimpact-lite or NIMA.  The Governor is required to select the agreement, if any, that provides the best financial advantage to the state.  In determining which agreement is most advantageous (if any), the Governor, in consultation with the commissioner, must consider the impact on the state’s gross receipt of premium tax and the potential additional administrative burden to the state and surplus line brokers procuring or placing surplus line insurance.  In the event the Governor enters into a tax-sharing agreement, notice of the action must be communicated to certain legislative officials, and the commissioner must submit an annual report to those legislators assessing whether the agreement continues to be in the best interest of the state.

Georgia’s legislation also adopts the NRRA's uniform eligibility requirements for U.S. domestic and non-domestic insurers and incorporates the NRRA’s exempt commercial purchaser exemption.  The legislation further incorporates the NRRA’s definition of home state, however, does not otherwise provide for exclusive home state regulation or taxation.  Georgia’s bill further requires brokers to apply the tax rates of each state to the applicable portions of multi-state risks, and continues to require submission of quarterly transaction reports.